Is Inequality a Political Choice?

Research by INET-affiliated scholars shows the US lags far behind its peers on inclusive growth, suggesting inequality is not an inevitable consequence of globalization and technology

The fact that most of the fruits of US economic growth have not been shared with the lower-middle and working class is accepted across the political spectrum in America. But that inequality is often treated as a somehow inevitable consequence of globalization and technological change. That view is contradicted by the comparison of income growth and distribution statistics between the US and three others rich countries, France, Norway and the UK — according to new research by Max Roser and Stefan Thewissen of the Institute for New Economic Thinking at Oxford. Writing in Vox on the database they’ve constructed, Roser and Thewissen note:

“We compare the evolution of the income an individual needs to be right at the 10th percentile of the income distribution to the evolution of the income of an individual at the 90th percentile. We call these two groups the ‘poor’ and the ‘rich.’ We can then look at how much incomes grew for the poor and the rich in absolute terms as well as relative to each other — and thereby assess the extent to which growth was widely shared. We measure income after taxes and transfers, and adjust for differences in prices over time and across countries using inflation and purchasing power information. Our database can be accessed online, with more information on our exact measure and data for other countries.”

The US performs poorly by comparison to these countries, for reasons that may have more to do with structure, institutions and policy. Roser and Thewissen conclude:

“The differences we have identified across countries and time imply that increased globalization and technological change cannot be blamed as sole causes for rising inequality. Those forces work across borders and should affect all countries. The fact that other developed countries have been able to share the benefits of these market forces suggests that policy choices on the national level play a central role for boosting living standards. Policies can make a difference not just in growth levels, but also in who gets the benefits of that growth.”